Final answer:
The Present Value Index is the most appropriate technique for the Britannia Company's capital rationing situation, as it compares the present value of cash flows to the initial investment and includes the time value of money unlike the Payback Technique. Option B is the correct answer.
Step-by-step explanation:
When choosing between investment opportunities under capital rationing, where there are limited funds available, it is important to select the investment that will provide the most efficient use of the capital. The best technique to use in this scenario is the Present Value Index (Option B), also known as the Profitability Index. This method involves calculating the present value of each project's cash flows and comparing them to the initial investment.
The Net Present Value (NPV) method (Option C) could also be considered suitable as it accounts for the time value of money and could help in determining whether the investments will add value to the company. However, the Net Present Value does not directly account for the limitation of funds.
On the other hand, the Payback Technique (Option A) is not the best choice in the context of capital rationing because it only considers how quickly the initial investment is recovered and ignores the cash flows beyond the payback period and the time value of money.
In conclusion, the Present Value Index is the most appropriate technique for choosing between Investment A and Investment B under capital rationing.